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Morning Commentary: Preferred stocks sputter as December kicks off; DTE, Capital One trade lower
By Stephanie N. Rotondo
Seattle, Dec. 1 – The first trading day of December was not starting out well for preferred stocks.
A trader noted that “generally, the whole market is off a decent amount today.” He attributed the overall weakness to a sell-off in the bond market.
The Wells Fargo Hybrid and Preferred Securities index was down 71 basis points at mid-morning.
Recent issues were particularly pressured by the negative tone. For instance, DTE Energy Co.’s new $280 million of 6% $25-par 2016 series F junior subordinated debentures due 2076 – a deal priced Monday – were trading all the way down to $24.05 bid, a trader said.
Capital One Financial Corp.’s $500 million of 6% series H noncumulative perpetual preferred stock was also on the low side, being quoted at $24.30 bid, $24.45 offered.
That deal came Nov. 21 and is slated to hit the New York Stock Exchange on Friday, according to a market source.
The ticker symbol will be “COFPH.”
Despite the weaker levels, Fannie Mae and Freddie Mac paper continued to push higher in the wake of Steven Mnuchin’s remarks that the GSEs need to get out from under government control.
Mnuchin, the current top pick for the incoming administration’s Treasury Secretary, said in a Fox Business interview on Wednesday that reforming the GSEs was a top priority, resulting in sizable gains for the agencies’ preferreds.
Come Thursday, that trend was continuing, with Fannie’s 8.25% series S fixed-to-floating rate noncumulative preferreds (OTCBB: FNMAS) rising 82 cents, or 9.98%, to $9.04 in early dealings. Freddie’s 8.375% fixed-to-floating rate noncumulative preferreds (OTCBB: FMCKJ) were up 45 cents, or 5.49%, at $8.65.
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